Q4 2023 Dyadic International Inc Earnings Call

Participants

Ping Rawson; CFO; Dyadic International, Inc.

Mark Emalfarb; Founder and CEO; Dyadic International, Inc.

Joe Hazelton; COO; Dyadic International, Inc.

John Vandermosten; Analyst; Zacks Small Cap Research

Presentation

Operator

Good evening, and welcome to the Dyadic International's Fiscal Year 2023 year end conference call. Currently, all participants are in a listen-only mode. Following management's prepared remarks, there will be a brief question-and-answer session. As a reminder, this conference call is being recorded today, March 28, 2024. I would now like to turn the call over to Ms. Ping Rawson, Dyadic's Chief Financial Officer. Please go ahead.

Ping Rawson

And thank you, operator. Good evening, and welcome, everyone to Dyadic International's Fiscal Year 2023 year end conference call. I hope you have had a chance to have an opportunity to review Dyadic's press releases announcing financial results for the year ended December 31st, 2023, and a separate press release on changes in Board and management leadership roles. You may access our release and Form 10 K under the Investors section of the Company's website at Abbott.com.
On today's call, our President and CEO, Mark Hemofarm, and our new Chief Operating Officer, Joe Hazelton, will give a review of our 2024 business and corporate highlights, including a brief summary of our recent research and business development efforts. I will follow with a review of our financial results of 2023 in more detail. We'll then hold a brief Q&A session at this time, I would like to inform you that certain commentary made in this conference call may be considered forward-looking statements, which involve risks and uncertainties and other factors that could cause Dyadic's actual results, performance, scientific or otherwise or achievements to be materially different from those expressed or implied by these forward-looking statements.
Statically expressly disclaims any duty to provide updates to its forward-looking statements, whether because of new information, future events or otherwise Participants are directed to the risk factors set forth in Dyadic's reports filed with the SEC. It is now my pleasure to pass the call to our CEO, Mark Emalfarb.

Mark Emalfarb

Hello, everyone, and thank you for joining our full year 2023 results call. I cannot overstate how exciting this time is in Dyadic history. We are uniquely positioned to rapidly capitalize on the present opportunities and those on the horizon. For the next two years, we anticipate reaching multiple revenue streams and other inflection points through fully funded collaborations in the Company's pipeline products to enhance shareholder value. We are building upon momentum witnessed in 2023, and we have further accelerated our progress the claim and acknowledgments of our C1 technology for speed, productivity and effectiveness process, both domestically and globally, presuming recommendations or commendations from academia, industry and government bodies to see one platforms.
Distinction is further bolstered by a clinical validation through our successful Phase one human trial, which not only demonstrated that the proteins produced from our C1 cells are safe for use in humans and humans. Additionally, the DYA. 100 vaccine has been shown to induce immune responses at both dose levels, suggesting its potential efficacy drug generating protective immunity against the target virus. We believe that our successful first-in-human clinical trial of IC. one produce protein redefined the benchmarks for recombinant protein antigen production levels see once productivity is up to 300 times that effectively by ourselves, coupled with its abbreviated fermentation times and lack of need for viruses or endotoxin needing removal and downstream processing skills.
The future with a rapid large-scale and cost efficient production of recombinant vaccine becomes the norm rather than the exception. Speaking to our pharmaceutical initiatives, I cannot overstate the significance of the positive outcomes from our Phase one human study that has bolstered industry attention toward Dyadic and our C1 expression platform. Since the announcement of these top results, heightened interest from industry partners, including top 10 pharmaceutical firms this spurred the commencement of over 12 fully funded vaccine and antibody projects.
These projects span various disease areas exemplified by our strategic partnership with Arabian BV, a Dutch innovative SME founded by seasoned entrepreneurs, investing scientists, Radian secured $1.7 million or $1.7 million and funding from your sellers for the Avatar project, namely deleveraging for all of your expertise to develop a rabies vaccine utilizing Dyadic C1 protein production platform. Additionally, the Israeli Institute for Biological Research, the IVR is harnessing Dyadic's microbial platform expertise in conjunction with their own capabilities in antibodies and antigens, discovery to develop and manufacture treatments and vaccines, emerging diseases and potential bio threats for out-licensing opportunities in the realm of infectious diseases.
Our recombinant vaccine capability continues to attract growing interest. We are engaged in an expanded research collaboration with a top five pharm aceutical company to develop a number of antigen preventing and treating various infectious disease Furthermore, we have initiated a new research collaboration with the vaccine and immunotherapy center, Vic and Massachusetts General Hospital, which received over $5 million in funding from the Department of Defense DoD to develop and test vaccine antigens for influenza A. and other infectious diseases, including antigen produced using our C1 platform. Additionally, our depth of its expression platform has exceeded our initial expectations by monitoring a little over a year ago, gain substantial traction generating revenue in both the alternative protein and bio industrial sectors.
During today's call, Joe and I will review our strategic blueprint financing revenue growth, highlighting significant technological strides and recent achievements and business development across our primary markets. We will elaborate on our near and longer-term strategy aimed at bolstering our revenue outlook and enhancing shareholder value. So I would like to extend our gratitude to long-term shareholders for their steadfast support as we successfully closed a $6 million convertible note financing. These funds will fuel the acceleration of our goal to introduce revenue-generating products targeting both pharmaceutical and non-pharmaceutical sectors.
Our recent announcements of both business and scientific achievements demonstrated the success of our corporate strategy is beginning to be realized in the Dyax is strongly positioned for new area of revenue growth to further support our growth and periods. We have announced changes in leadership roles at the Board level and management team, we expanded the responsibilities of our Chief Business Officer, Joe Hazelton, appointing him as Chief Operating Officer. He's demonstrated pivotal role in advancing our strategic objectives is undeniable strength and financial resources and scientific prowess. We are well positioned to execute our strategic business objectives.
Michael Turner, stepping down as Chairman of Dyadic's Board of Directors and making room for Patrick Lucy, who has been appointed to succeed him effective immediately. Mr. Tanner will continue as a director to the end of his current term, which ends in June 2025 at the time, which we expect to retire at the very bottom and is retiring from the Board at the end of its term in June 2024, which will result in reduction of the size of the Board to six members. I would like to thank Marc Tom McDonough for his leadership as Chairman. Over the past 10 years and for agreeing to serve on the remaining one year term, enabling a smooth transition of Board leadership.
I'm excited that Mr. Lucey, who has been an outstanding Board member over the past three years has agreed to take on the role of Board Chairman an important time for Dyax in our ongoing efforts to make clear our strategy business perspectives, we will spotlight our focus on our three primary sectors, human health, animal health and alternative proteins. John, I will outline our achievements and strategic outlook spanning both pharmaceutical and non-pharmaceutical domain, along with providing a look into our road map for 2024 and beyond. We are poised at the edge of leveraging our microbial protein production platforms to one database to create antigen antibody enzymes and other recombinant protein pivotal stage of our core sectors.
These efforts are anticipated to unlock the monetization avenues significantly enhancing shareholder value for Dyadic and our partners in defining direct value proposition against conventional platforms for the manufacture of vaccines. Therapeutics is pivotal to grasp the foundation's seamless uniqueness, which is our industrial heritage facilities. And just tobacco is the bedrock of our approach to biologics pharmaceutical production. Traditional cell lines typically evolve from research scale, struggling to balance increasing scale and yield against cost constraints. In stark contrast to that Dyadic harnesses microbial platforms and seasoned veterans make economical production of large scale, bio industrial proteins and enzymes at large scales. This deep-rooted experience being repurposed to navigate a complex landscape of biologic pharmaceutical development and production, marrying it with industrial scale efficiencies with pharmaceutical precision.
As I highlighted earlier, the C1 platform distinction is further bolstered by clinical validation through our successful Phase one human trial, which not only demonstrated that proteins produced from C1 cells are safe for use in humans and that the DY. vaccine has been shown to induce immune responses at both dose levels suggesting its potential potential efficacy in generating protective immunity against the target buyers. We believe we are redefining the benchmark for recombinant protein antigen production levels. We are pleased with the progress of the C1 platform, but it's crucial to keep investing in validating and advancing our technology to match emerging science and support our partners' development efforts to this end, more than a year ago, engaged Cygnus technologies to co-develop a C1 host cell protein ACP. saliva kit.
This step is vital for regulatory reviews and manufacturing as ACP revenues can cause toxicity and affect biologic stability. These kits are essential for detecting and quantifying HCPs, very manufacturing to ensure product purity and quality necessity necessary for marketing approval. And we are excited that C1 ACP Allied, the kits now available to Dyadic and Cygnus customers expanding our portfolio with potential new commercial products produced by the C1 platform is equally important. Dyadic has entered into a development and commercial is great validation agreement with EU-based Fiona to explore the development of messenger RNA using our C1 technology. This collaboration combines beyond has an innovative new periodic bio RNA platform with direct proven C1 protein production platform.
The same is true on a pharmaceutical industry, a potentially more cost efficient method for manufacturing, large quantities of lower cost messenger RNAs, facilitating broader global access to mRNA vaccines and drugs. Turning our focus to our therapeutic proteins, particularly monoclonal antibodies, we see significant potential in utilizing the C1 production system for the production of antibodies targeting infectious disease and other diseases such as arthritis, oncology and neurological diseases, therapeutic proteins and a compliant combating infectious disease often require shorter term treatment durations. They may necessitate larger quantities and shorter manufacturing times to effectively and efficiently address pandemics or outbreaks.
Earlier this week, we announced the publication of a manuscript in a steam peer-reviewed journal Nature Communications detailing the preclinical studies conducted on a monoclonal antibody produced using the C1 system utilizing nonhuman primate enhancers as models in the nonhuman primate challenge study, a C1 produced COVID-19 monoclonal antibody previously shown to present broad neutralization protection against various variants, including all the way from one to be a one and BA. to Amazon as well as the earlier variance concerning enhancers and underwent dosing findings from the challenge study involving SARS-CoV-2, Delta variant and nonhuman primates.
We've indicated promisingly high levels of protection. This marks the agents for the first instance for the C1 produced monoclonal antibody being employed in nonhuman primate study performing both the safety and efficacy of C1 produced antibody for addressing infectious diseases. These recent findings regarding the safety and efficacy of monoclonal antibodies produced using C1 technology are significant and accelerating the research and development efforts in the field of infectious and other diseases. This is particularly noteworthy taken with the previously reported data that C1 produced may have a comparable efficacy and safety signals produce using traditional Cho Chinese hamster ovary cell lines. Just this week, Dyadic entered into a collaboration with another top 10 pharmaceutical company to develop an infectious disease monoclonal antibody and vaccine antigen using C1 technology, which marks a significant step forward in this area. Effective this collaboration is fully funded by a top 10 pharmaceutical company underscores the confidence in the potential of C1 technology for producing effective treatments and vaccines against infectious and other diseases.
Moreover, Dyadic's existing collaborations with industry partners for producing monoclonal antibody targeting diseases like Ebola and Marburg highlight the versatility and applicability of C1 technology across a range of infectious diseases. Overall, these developments suggest a promising future for C1 technology in the field of infectious and other disease, research and development, potentially leading to more effective treatments and vaccines against a variety of pathogens for global population. We are continuing our efforts to forge and sustain long-term strategic partnerships in the pharmaceutical sector for both humans and animals. This is evidence as well as we enter the 4th year of our expanded collaboration with Rubicon health to advance commercial products and clinical development of vaccines to human and animal health in Africa, it could worsen our collaboration with several added to develop and produce positive vaccine is entering its 5th year has expanded to additional infectious diseases and disease areas over that time.
Animal health remains a targeted segment for data to the higher-margin sensitivity of pharmaceutical biologics and a significant impact of outbreak on the global supply chain and potentially human health. We continue to expand our presence in the animal health market for vaccines and therapeutic proteins. I will now turn the call over to our Chief Operating Officer, Joe Hazelton, to provide an update on our non-pharmaceutical license and product opportunities. Joe?

Joe Hazelton

Thank you, Mark. The Dyadic remains truly excited about the long therapeutic uses of its microbial platforms, which are adept at producing recombinant proteins and enzymes. We believe this field offers a significant promise in terms of both opportunity and revenue in the near term for this antibiotic is committed to allocating appropriate resources and providing support for current and future products. Within this rapidly expanding sector our gene expression and protein production platforms, including the recently launched app in the US are tailored to facilitate Swift development and large-scale manufacturing and cost effective enzymes, proteins, metabolites and other biological products.
These products span the full spectrum of production rates from research to food grade and ultimately pharmaceutical grade materials. Their applications are diverse and have published diagnostics research, nutrition health and wellness, reflecting the increasing demand in these areas. Diving deeper into our strategic plans to boost short-term revenue potential, we remain focused and confident that identifying and producing high value carbon targets that can be rapidly and efficiently commercialize provides the best near term revenue potential for now seeing the strategy creating value, as evidenced by the recent term sheet we've executed with a global albumin manufacturer and distributor to develop and license Dyadic's convalescent serum albumin products initially for diagnostic and research grade purposes.
This strategic partnership will allow for more rapid commercialization of our recombinant products to enter the market within the next 12 months, and we hope to be able to share more information in the very near future on this important collaboration for common share amounts and serves as a prime illustration of our focus on valuable recombinant products, offering diverse commercialization prospects across various market segments. For example, pharmaceutical grade zero, none of them holds potential disease treatment and is integral to vaccine development serving as a carrier protein for therapeutics and as a standard agent in research and development.
Recent completion of certificates of analysis for our recombinant human and recombinant bovine albumin firms, their analytical equivalence to currently commercialized research-grade products on the market today. Moreover, we're exploring recombinant bovine albumin application at food-grade in cell culture media for cultured meat production. This showcases dieters capacity to produce animal-free recumbent serum albumin across different grades at competitive prices using our efficient and affordable microbial platforms. Such opportunities may lead to broader strategic options, including joint ventures or spinoffs, attune to successful companies like ABI index, which was acquired for $400 million in 2022 to strengthen Dyadic's level than the alternative protein sector and explore broader exit opportunities.
We've executed a co-promotion agreement with Turkish companies. The tech Inc., their patent pending animal free growth, medium supplement aims to reduce expenses linked to costly culture media component. This collaboration enables that to extend its reach into the cell culture media domain earnings share of all net sales from the supplement. Additionally, our successful initial production of recombinant transfer using our microbial platforms presents another potential product for the alternative protein and cell culture sectors outside of recombinant cell culture products, we believe accommodate non-animal dairy products offer Dyax the potential for more rapid commercialization opportunities.
The global animal three dairy products market was valued at over $26 billion in 2022 and is projected to reach more than $75 billion by 2032. Today, animal free dairy products are crafted through precision microbial fermentation technology, a market driven by evolving consumer preferences and concerns over health disease associated with traditional cow's milk, such as lactose intolerance and allergies. Despite the current high cost of animal free, Gary, this obstacle aligns with our expertise in producing large quantities of cost-effective recombinant proteins using our microbial expression platforms. Our 2023 agreement involving our debit platform for developing and commercializing non-animal dairy enzymes for food production, inclusive of upfront payments milestones.
Royalties validates our focus on this sector and reflects growing interest uses that the basis for the development and manufacture of non-animal dairy products. We also anticipate success fees from this collaboration in the first half of 2020. For Furthermore, we have engineered a highly productive strain of non-animal recombinant alpha lab to albumin, the key whey protein commercially available in large volumes. We're actively sampling our outlet to albumin and casing products and have commenced development of beta lactam Golden, another widely used whey protein and lactoferrin for food grade products sampling anticipated to begin in the third quarter of this year. Numerous discussions with potential partners are ongoing, bolstering our confidence in the short term revenue prospects of the non animal dairy segment in 2024 and beyond.
Our focus in cell culture and I'm a dairy products were further expanding our potential pipeline through the development of several bio industrial-grade enzymes that have the potential for use in multiple industries such as nutrition, biofuels and bio refinery. While the increase from the rate increase in the volume of internal pipeline products and extra partnerships within non-pharmaceutical and pharmaceutical applications, we believe we can accelerate more consistent revenue generation in the coming year. That is not strictly reliant on platform licensing and inclusive of potential product licensing for targets such as recombinant albumin enzyme catalyst for cell culture media components.
With the funding secured in the first quarter and the recent organizational adjustments, Dyadic is poised for a new phase of growth. I'm grateful to mark and Dyadic's Board of Directors for their trust in me as the new Chief Operating Officer Mark support has been invaluable, and I'm eager to play a more active role in daily operations, aligning our research and development with our business teams streamlining our operating model to ultimately achieve our goals efficiently. While the future looks promising there's still work ahead to capitalize on the opportunities before us and drive near term revenue growth across our core sectors. Our strategic plan has been refined, and we have commenced its implementation in key areas where our technologies such as the delta was platform can have significant impact.
Additionally, we're exploring new opportunities aligned with our verticals and target markets with high potential returns, particularly those seeking cost effective solutions for affordable recombinant protein production. With that, I'd like to turn the call over to our CFO, Ping Rawson, to go through our financials came Thank you, John, and thank you, everyone, for joining our call today.

Ping Rawson

As Mark mentioned earlier on March eighth, 2024, the company issued an aggregate principal amount of $6,000,000 senior secured convertible promissory note through March eighth, 2027. In the private placement, the convertible notes have a conversion price of $1.79 with no warrant purchasers of the convertible notes include immediate family members and family trusts related to marketing of presidency of the Francisco trust, an existing holder of more than 5% of the company's outstanding common stock.
As of December 31st, 2023, we have cash and investment grade securities of $7.3 million, combined with the $6 million we just raised $1.3 million from the sale of our equity interest in alpha design and $600,000 upfront payment from our end most retiree enzyme licensing agreements in 2022, we believe we are well positioned financially to support our near-term revenue growth. It accelerates our strategic objective of commercialization opportunities for pharmaceutical and non-pharmaceutical applications. I will now go over our key financial results for the year ended December 31st, 2023. In more detail, you can find additional information in our earnings press release and Form 10-K, which we filed earlier today.
Research and development revenue and license revenue for the year ended December 31st, 2023, slightly decreased to approximately $2.9 million compared to $2.93 million for the year ended December 31st, 2020, to half of research and development. Revenue for the year ended December 31st, 2023, decreased to approximately $2 million compared to $2.1 million for the year ended December 31st, 2022. The decrease was related to higher individual contract amounts on certain research funding and related work performed during 2022.
Research and development expenses for the year ended December 31st, 2023, decreased to approximately $3.3 million compared to $4.5 million for the year ended December 31st, 2022. The decrease primarily reflected the winding down of activities related to the Company's Phase one clinical trial of TYAR. 100 COVID-19 vaccine candidates. G&a expenses for the year ended December 31st, 2023, decreased to approximately $5.8 million compared to $6.4 million for the year ended December 31st, 2022. The decrease principally reflected a decrease in management incentives of $466,000 business development and investor relations costs of $219,000 and the legal expenses partially offset by increases in insurance premiums of $96,000 and other increases net loss for the year ended December 31, 2023 was approximately $6.8 million or $0.24 per share compared to a net loss of $9.7 million or $0.34 per share for the year ended December 31st, 2020.
With that, I will now ask the operator to begin Q&A session. Each caller will be allowed. One question and one follow-up question to provide all callers an opportunity to participate if time permits The operator will allow additional questions from those who have already spoken operator.

Question and Answer Session

Operator

(Operator Instructions) John Vandermosten, Zacks.

John Vandermosten

Thank you, and good evening, everyone. I know that Dyadic has C1 produced protein that's been administered to humans and you've completed the trial. And Mark, you also mentioned that several top pharma companies had come in and asked to work with you. Has that changed the nature of what the collaborators want to work on having that data?

Mark Emalfarb

Yes. I'll let Joe answer that first, Jonathan, it's a great question. And to be honest, it has to go traditionally, as you looked at all of our projects that are more comparative using C1 versus products that have already been produced in ourselves. And I'm not saying that's typically not always going to be the case moving forward. But what we've seen is an increase in C1 actually being chosen as either the first or producing hard to target express proteins and other systems. So it's less comparative and more actual commercialization targets that are being put into the system.

John Vandermosten

Okay. And Joe, congratulations on your on your ascension to seal. It wanted to mention that to you. And then my second question is on on some of the partnerships you have the Arabian partnership. There was an equity component to that and do you have any other arrangements like this? And is this going to be a push in the future? You have a component like that as part of the arrangement?

Joe Hazelton

Well, I think if you look back now, design was similar to that where we netted $1.3 million because when a small biotech companies start out for whether it's biotech or an enzyme industrial company, you don't traditionally have money to spend and license agreements. So we take equity rather than take nothing and sort of leave opportunities on the shelf BD, I remember a couple of years ago, we also got about $1.3 million. So both of those have already turned into cash. So they're very good decisions.

Ping Rawson

Roubik one health is another example, where we actually have an equity position right in that company and of course, here with Radiant. So we're gaining not only potential opportunity to get revenue from future equity positions falsely getting more products in that marketplace. Our pricing be to expand the use and adoption and speed the adoption of the technology platforms, whether it be C1 for pharmaceuticals or death of us for non-pharmaceutical applications. So there's a lot of really benefits that are intangibles that you might not see that we see and we're recognizing and we're actually commercializing in some cases turning into cash as we did with BDII. with Amarin.
So we'll do those if and when it makes sense. But of course, for big pharma and big industrial companies as we did with Shell and be as open as and go in the past. And then ultimately, we generated $110 million of non-dilutive money by doing those kind of deals, so upfront cash rather than equity. So we're looking for upfront cash milestones and royalties. And those are the goals and objectives for us as we it takes longer to get that in some of the big pharmaceutical companies.
But we're underway as we've just done to that point, we're flexible in that approach. But to Mark's point, it's not our priority priority obviously is non-diluted funding as early as possible in any of our agreements. But what we need to remain open because Mark's absolutely right, the more products and the more data we can generate, especially in human beings, potentially nonhuman primates that consistently adds to the validation of the platform. But again, it's not going to be our primary focus to retain equity, but we will do so when appropriate.

John Vandermosten

Great. Thank you very much.

Mark Emalfarb

And John, just to add to that, the Arabian project not only potentially gives us a payment as an equity. We have milestone payments and royalties on the product, but just as importantly is the agencies really the WHO set a foundation and path IAVIVIC. These people are looking at what we're doing with this technology and the more it gets adopted, the more opportunities we can get to get funding from a lot of these nonprofit organizations that fund vaccine development and will absolutely need to be running monoclonal antibody development. We think we just have a game-changing platform.

Operator

(Operator Instructions) There are no further questions in the queue. I'd like to hand it back to Mark Emalfarb for closing remarks.

Mark Emalfarb

In fiscal year 2023, we are witnessing the positive impact of our Phase one human clinical safety trial, further validating the C1 platform potential for pharmaceutical use in both human and animal health. Moreover, the investment in our deposition platform for alternative proteins and enzymes is beginning to yield revenue marking a significant milestone. Our primary focus remains on enhancing direct value within the life science industry, which in turn benefits our shareholders and promote global access to affordable vaccine and therapeutics. We refined our focus in adjusted our business strategy to capitalize on existing and emerging commercialization opportunities in the near term, aligning with our mission as a global biotechnology company to revolutionize that we feed fuel and will the company remains dedicated to driving near-term revenue growth through innovation and commercialization efforts expanding the use of database platform for developing alternative overcome proteins such as elbow like albumin.
Our common human element and non-animal dairy enzymes for food production because various other applications once again, I cannot overstate how exciting this time is in Diodes' history. We are uniquely positioned to rapidly capitalize on the present opportunities and those on the horizon. Thank you for joining us in today's fiscal year 2023 conference call. We look forward to keeping you informed as we progress in commercial and scientific endeavors during our next call. Please stay tuned for additional updates from us.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation and you may disconnect your lines at this time and have a wonderful day.